Everything Else Held Constant,when Financial Frictions Increase,the Real Cost of Borrowing

question 99

Multiple Choice

Everything else held constant,when financial frictions increase,the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate.

• A)increases;falls
• B)decreases;falls
• C)decreases;rises
• D)increases;rises

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Definitions:

Energy

The capacity to do work, manifested in physical (like mechanical, thermal) or chemical forms and convertible from one form to another.

Optimism

A general tendency to expect good outcomes.

Schizophrenia

A serious mental disorder characterized by distortions in thinking, perception, emotions, language, sense of self, and behavior.

Irrational Thought

A type of thinking that is not based on reason or clear thinking, often leading to unrealistic expectations and negative outcomes.